The leverage that helped fuel the US stock rally is now becoming an increasing source of unease. The surge in market leverage, stemming in part from the massive growth of levered exchange-traded products, retail margin accounts and hedge fund deposits at prime brokers, is stoking worries that it may exacerbate the next crisis. The demand to borrow money has driven an unusual mid-year spike in financing costs, which have reached the highest levels since December 2024. Andy Kent, a broker at Kyte, said leverage has become one of the defining themes for investors, with margin debt elevated and borrowing across parts of the shadow banking system continuing to expand. The leverage is growing along with uncertainty over the path of equities, inflation and interest rates, fueling demand from investors for cross-asset hybrid option hedges, even as general market measures of volatility show little fear of a massive selloff.
Bank of America Corp
CME Group Inc
JPMorgan Chase & Co